Tuesday, July 12, 2011

Germany at the Rubicon

From today's Open Europe news summary:

In the Telegraph, Ambrose Evans-Pritchard argues that, with the eurozone crisis seemingly turning to Spain and Italy, “Germany must now be willing either to buy or guarantee Spanish and Italian debt, and in doing so to cross the Rubicon to fiscal and political union, or accept that EMU must break up with calamitous consequences for German foreign policy. Large matters, beyond the intellectual vision of Germany's current leaders.”

Germany--and the rest of the world, for that matter--must face up to the fact that debt, once created, cannot be ignored. It must be repaid or written off. It is time for the world to recognize that more debt solves nothing and, in fact, is counter-productive. More debt forestalls reform and funds the failed inflationist and statist policies of the post-war years. I hope that Evans-Pritchard is wrong and that these matters are not beyond the intellectual vision of Germany's current leaders. The Euro project is a failure due to economic laws that cannot be ignored. Fiat, government controlled money is a failure at the national level; elevating it to a regional level solves nothing but merely masks the inherent fatal flaws.

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